Fracking Litigation Drives Up Insurance Costs

Reuters - From water worries to well blowouts, the inherent risks of oil and gas extraction are often played down by those in the business. But another group of profit-seekers has every reason to keep a close eye on dangers for drillers: their insurers. Underwriters now face a politically charged problem in the perceived threats to water supplies of hydraulic fracturing. Amid litigation and federal probes, insurance companies are left scratching their heads over how to price the risk of the oil and gas production technique now better known as fracking.

The lawsuits and tests so far provide little help. One much-cited case involved Cabot Oil & Gas Co, which settled in late 2010 for $4.1 million with residents of the small Pennsylvania town of Dimock over methane found in their water. Then on Friday, the Environmental Protection Agency said it had completed testing water at 61 homes in Dimock and found the drinking water was safe to consume. Insurers may get more clarity once EPA releases initial findings, due later this year, of its five-state investigation into the risks to drinking water of fracking.

Environmentalists say it can also pollute if fracking fluids seep out of wells. An EPA study showed fracking chemicals were likely present in a Wyoming aquifer near the town of Pavillion, but then it agreed in March to retest the water.
"From an insurance standpoint, it's really hard to underwrite something with a lot of uncertainty," Jeffrey Hanneman, the Texas-based director of environmental practice at insurance broker Aon Risk Solutions, said of fracking, "an area that now preoccupies a lot of my time." Read full story here: News New Mexico

Fracking Litigation Drives Up Insurance Costs